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Pragati is a seasoned Content Writer with extensive experience in the field. Her expertise spans multiple domains, including press releases, news site content, SEO, and website content writing. With her broad knowledge of content marketing, Pragati excels as a content strategist. Her role involves crafting engaging social media posts and well-researched blog articles to build a unique brand identity. Additionally, she collaborates effectively with her team to drive client growth, showcasing her strong teamwork and strategic abilities.

Pragati Kathuria (Author)

Associate Consultant L2 - Content Development

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Pawanpreet Singh

Solutions Architect

Pawanpreet is an seasoned Project Manager with a wealth of knowledge in software development, specializing in frontend and mobile applications. He possesses a strong command of project management tools, including Jira, Trello, and others. With a proven track record, he has successfully overseen the delivery of multiple software development projects, managing budgets and large teams. Notable projects he has contributed to include TimeForge, Yogyata, Kairos, Veto, Inspirien App, and more. Pawanpreet excels in developing and maintaining project plans, schedules, and budgets, ensuring timely delivery while staying within allocated resources. He collaborates closely with clients to define project scope and requirements, establish timelines and milestones, and effectively manage expectations. Regular project status meetings are conducted by him, providing clients and stakeholders with consistent updates on project progress, risks, and issues. Additionally, he coaches and mentors project leads, offering guidance on project management best practices and supporting their professional development.
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Manish Kumar Narang

Sr. Project Manager- Technology

Manish is an experienced Backend Developer with several years of industry experience in the IT field. He possesses a wide range of skills, including expertise in Backend languages like Core Java, J2EE, Hibernate, Spring/Spring Boot, and Python. Manish is also proficient in relational databases such as MySQL, PostgreSQL, and Oracle. He has hands-on experience in API implementations, web services development, testing, and deployments. Manish has contributed to various internal and client projects, including PMO, Catalyst, Communication-Scaffold, Oodles-Dashboard, and Devops Support, delivering significant business value. He is known for his innovative mindset and excellent problem-solving abilities. He keeps himself updated with new technologies by reading about them. He is skilled at collaborating closely with clients to define project scope and requirements, establish project timelines and milestones, and manage expectations. Manish conducts regular project status meetings, ensuring regular updates to clients and stakeholders regarding project progress, risks, and issues. Additionally, he serves as a mentor and coach to junior developers, offering guidance on project management best practices and fostering their skills development.

Top 5 Causes of Cost Overrun in Project Management

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Pragati Kathuria
Jul 09, 2025
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Area Of Expertise:
Variance Tracking

You're halfway through a project, and suddenly the budget doesn't add up.
Sound familiar?

Cost overruns—when the actual cost of a project goes beyond the planned budget—can quietly eat away your profits, delay your timelines, and stretch your team too thin. And the worst part? Most of them are avoidable.

Now, we'll walk through to these three core queries to get understand:

  • Top 5 causes of cost overruns 
  • Why do they happen?
  • How can you stop them before damaging your next project?

1. Weak Project Planning

Related Query: What causes project cost overruns in the beginning?

Many projects start with energy, but without a strong foundation. Poor planning leads to unclear goals, missing tasks, and inaccurate budgets.

This becomes a big problem as the project progresses.

What usually goes wrong:

  • No detailed breakdown of tasks
  • Overlapping responsibilities
  • Unclear deadlines or missing dependencies

How to avoid it:

*Our Expert's Insight: Most budget issues start with planning, not execution. Fix the plan first.*

Bonus: Learn about the Role of Variance Tracking in Project Management.

2. Scope Creep

Related Query: Why does scope creep increase project costs?

Scope creep is when extra tasks or features slip into a project without revisiting the original timeline or budget.

It usually starts small. “Let's just add this one thing.” But multiply that by five, and your project turns into something else entirely.

Why does it get expensive?

  • More work = more time and manpower
  • Teams get stretched, reducing quality
  • Budget estimates no longer apply

What you can do:

  • Lock the scope with all stakeholders before you begin
  • Use a change request process for any new additions
  • Review how each new task affects cost and delivery

*Our Expert's Insight: Not all changes are bad, but they need to be measured and managed.*

What is Scope Creep?
Scope creep is when extra tasks or features are added into a project without redefining the original timeline, budget or resources.

 

3. Inaccurate Budget Estimates

Related query: What impact do inaccurate estimates have on overall project expenses?

Estimates built on assumptions, not real data, are risky.

If you misjudge how much time, work, or resources a task needs, your budget won't hold up. Teams are forced to rush or cut corners—neither of which ends well.

Common mistakes:

  • Using guesswork or best-case scenarios
  • Missing hidden costs (tools, licenses, third-party fees)
  • Not involving subject matter experts (SMEs)

Smarter approach:

  • Base your estimate on historical data
  • Break down costs per task or milestone
  • Include a contingency budget (typically 10–15%)

*Our Expert's Insight: A good estimate doesn't just look at what's visible—it accounts for the unknowns too.*

Solve this problem with Key Variance Tracking Tips to avoid Cost Overruns.

4. Delays in Timeline

Related query: How do time delays lead to extra project costs?

Time overruns quickly turn into cost overruns.

Extra days mean extra resources, salaries, software usage, and sometimes penalties. If multiple tasks get delayed, the domino effect can crash your schedule and budget.

What leads to delays:

  • Resource bottlenecks (one person stuck on too many tasks)
  • Dependency issues (one task can't start until another ends)
  • Poor risk planning (not accounting for roadblocks)

How to manage it:

  • Track progress weekly or daily
  • Flag delays early—don't wait till the end
  • Use tools to spot dependency clashes in your timeline

*Our Expert's Insight: Tracking doesn't mean micromanaging—it means catching issues before they grow.*

5. Miscommunication

Related query: Can poor communication cause budget issues in projects?

Yes. When teams, clients, and vendors are not aligned, costs increase.

Instructions are misunderstood. Work gets redone. Deadlines are missed. And worst of all—no one feels responsible.

What miscommunication looks like:

  • Different versions of the same task floating around
  • Unclear client expectations
  • Lack of updates between team members

How to fix it:

  • Hold short but regular check-ins
  • Use one central tool for project updates
  • Set clear ownership for tasks and decisions

Our Expert Insight: Most communication issues aren't about tools—they're about clarity and consistency.*

Try out these Variance Tracking Best Practices to save your project from cost overruns.

Final Thoughts

Cost overruns don't usually happen all at once.
They build up quietly—from unclear goals, extra tasks, late updates, or forgotten details.

The good news? You can prevent most of them.

5 Common Causes of Cost Variance | Quick Recap

  1. Weak project planning
  2. Scope creep
  3. Poor budget estimates
  4. Timeline delays
  5. Miscommunication

Start by fixing your planning process. Then manage changes smartly. Keep tracking the real costs as you go—and most importantly, talk to the team regularly.

That's how you protect your budget—and your project.

Frequently Asked Questions (FAQs)

Q1. How much buffer should I add to my project budget?
A general rule is to add 10–15% as a contingency to handle risks and unknowns. If the project involves complex dependencies or third parties, consider a higher buffer. Always base your buffer on past project learnings and current scope clarity. This small cushion can prevent budget shocks later.

Q2. What tools help prevent cost overruns?
 Use time tracking apps to visualize effort and cost per task.
 Work Breakdown Structure (WBS) tools help break down complexity early on.
The key is using one central tool everyone can access and update.

Q3. How often should I review my budget during the project?
It's smart to review your budget weekly—especially for fast-moving projects. Frequent check-ins help you spot minor issues before they become costly. In longer projects, a bi-weekly or milestone-based review also works. Make it part of your regular sprint or review meeting.

Q4. Can cost overruns be recovered?
Yes, in some cases—by cutting non-essential tasks or extending timelines. You can also renegotiate scope or seek additional funding with clear reasons. But recovery is harder than prevention, especially with tight margins. Your best move is catching issues early and correcting them fast.

Q5. Who should be responsible for controlling project costs?
Cost control is a shared responsibility—but it starts with the project manager. They must coordinate with finance, track spending, and raise red flags early. Team leads need to keep task statuses current and call out any cost spikes early. Clients should be informed regularly so everyone stays aligned.